Abstract:
Consistent stock performance contradicts random adjustment of stock prices in efficient
markets and is thus anomalous despite the potential of generating significant profits for
investors. This research set out to test the existence of consistent stock performance in
the NSE during the years 2001 to 2010 and to examine whether consistent stock
performance is associated with efficiency of NSE. Balanced monthly closing average
stock price data was employed for 32 sample stocks drawn using purposive sampling
technique from a population of 56 stocks listed in the NSE during the study period. In
order to identify consistent stock performance, frequency tests were employed. In order
to test association between consistent stock performance and efficiency of NSE 3 tests
were employed including: t-test to test the significance of abnormal returns of consistent
stock performance. Runs serial correlation test was employed to test serial correlation
of stock returns. Spearman rank correlation was also employed to test volatility of stock
prices with time. The results indicated weak presence of consistent stock performance in
the NSE and that abnormal returns of consistently performing stocks were insignificant.
There was also zero serial correlation of stock returns and stock prices of consistently
performing stocks exhibited low volatility with time. The overall results indicate that
NSE may be weak form efficient. This research contributes to new knowledge by
combining the alternative definitions of consistent stock performance to minimize on
the inherent weaknesses of each definition(cross sectional and longitudinal) which have
in the past been studied independently.
